Month: October 2024

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How Much Can I Borrow for a Home Loan?

How Much Can I Borrow for a Home Loan

When you’re considering purchasing a property, one of the first and most critical questions you’ll likely ask is, “How much can I borrow for a home loan?” Understanding this figure is crucial as it sets the boundaries for your property search, helping you to identify homes within your budget and avoid disappointment later in the process. Whether you’re a first-time buyer or looking to move up the property ladder, knowing your borrowing power is essential. This guide will help you navigate the complexities of mortgage borrowing, with a particular focus on the UK housing market, and how Homesearch Properties can assist you in your journey.

Understanding Mortgage Affordability

The amount you can borrow for a home loan is primarily determined by your financial situation. Lenders will assess your income, outgoings, and credit history to calculate how much they are willing to lend. This process is known as a mortgage affordability assessment.

1. Income Assessment

Your income is one of the most significant factors in determining how much you can borrow. Generally, lenders will lend a multiple of your annual income. In the UK, this typically ranges from 4 to 4.5 times your annual salary. For example, if you earn £50,000 per year, you might be able to borrow between £200,000 and £225,000. However, some lenders may offer higher multiples, especially if you have a strong credit history and low levels of debt.

If you’re purchasing a home with a partner, lenders will consider your combined income, potentially allowing you to borrow more. Homesearch Properties can help you find properties that fit within this budget, ensuring you’re looking at homes that are realistically affordable for you.

2. Outgoings and Debt

Lenders will also look at your outgoings and any existing debt. This includes other loans, credit card balances, car finance, and even childcare costs. The more debt and regular outgoings you have, the less you may be able to borrow. It’s essential to provide an accurate picture of your financial situation when applying for a mortgage, as this will impact the lender’s decision.

Reducing your debt before applying for a mortgage can increase your borrowing power. Paying off credit cards and personal loans, and minimising regular outgoings, can make a significant difference in how much a lender is willing to offer.

3. Credit History

Your credit history plays a vital role in how much you can borrow. Lenders will conduct a credit check to assess how well you have managed debt in the past. A good credit score can not only increase the amount you can borrow but also secure you a lower interest rate. Conversely, a poor credit history can limit your borrowing options and lead to higher interest rates.

If your credit history is less than perfect, it’s worth taking steps to improve it before applying for a mortgage. This might include ensuring you are on the electoral roll, paying down outstanding debts, and making sure you pay all your bills on time. Homesearch can advise on the steps to take to improve your credit score, helping you get the best possible mortgage deal.

4. Deposit Amount

The size of your deposit also impacts how much you can borrow. In the UK, the minimum deposit typically required is 5% of the property’s value. However, the more you can put down as a deposit, the better. A larger deposit reduces the loan-to-value (LTV) ratio, which is the amount of the loan compared to the value of the property. A lower LTV ratio is less risky for lenders, meaning they may offer you a better interest rate and, potentially, allow you to borrow more.

For example, if you’re looking at a property worth £300,000, a 10% deposit would be £30,000. The mortgage would then be for the remaining £270,000. The lower the LTV, the more options you will have when it comes to choosing a lender and securing favourable terms.

The Role of Interest Rates

Interest rates are another critical factor in determining how much you can borrow. Even a small difference in interest rates can have a significant impact on your monthly repayments and, consequently, how much a lender will allow you to borrow.

There are two main types of interest rates to consider: fixed and variable. A fixed-rate mortgage means your interest rate (and thus your monthly repayments) will stay the same for a set period, typically between 2 and 5 years. This can provide peace of mind as your repayments won’t change, even if interest rates rise.

A variable-rate mortgage, on the other hand, means your interest rate can go up or down. While you might benefit from lower rates initially, there’s a risk that rates could rise, increasing your monthly repayments. Lenders will consider these factors when assessing how much they are willing to lend, often being more cautious with variable-rate mortgages.

Homesearch can help you understand the different types of mortgages available and how they might affect your borrowing power. By comparing the market, Homesearch Properties can assist you in finding the best mortgage deal for your circumstances.

Mortgage Types and How They Affect Borrowing

There are several different types of mortgages available in the UK, each with its own advantages and disadvantages. The type of mortgage you choose can impact how much you can borrow and how much you will repay over the life of the loan.

1. Repayment Mortgages

A repayment mortgage is the most common type of home loan. With this type of mortgage, you make monthly payments that cover both the interest and a portion of the capital (the amount you borrowed). By the end of the mortgage term, usually 25 to 30 years, the entire loan will be repaid.

This type of mortgage is generally considered low-risk by lenders because the debt is being paid off gradually over time. As a result, lenders may be more willing to offer higher loan amounts.

2. Interest-Only Mortgages

With an interest-only mortgage, your monthly payments only cover the interest on the loan, not the capital. This means that at the end of the mortgage term, you will still owe the original amount you borrowed. Interest-only mortgages can make monthly repayments lower, which might seem attractive, but they carry significant risks.

Lenders are often more cautious with interest-only mortgages, and they may require you to have a solid plan in place for repaying the capital at the end of the term, such as investments or the sale of the property. Due to the higher risk, you may find that you can borrow less with an interest-only mortgage compared to a repayment mortgage.

3. Fixed-Rate Mortgages

As mentioned earlier, fixed-rate mortgages have an interest rate that stays the same for a set period. This predictability makes budgeting easier, as your monthly repayments won’t change, even if interest rates rise. Fixed-rate mortgages are popular among first-time buyers for this reason.

However, once the fixed-rate period ends, the mortgage will usually revert to the lender’s standard variable rate (SVR), which could be higher. It’s important to plan for this change when considering how much you can borrow.

4. Tracker Mortgages

Tracker mortgages are a type of variable-rate mortgage where the interest rate follows (or “tracks”) the Bank of England base rate plus a set percentage. If the base rate goes up, so do your monthly repayments, and if it goes down, your payments will decrease.

While tracker mortgages can offer lower rates initially, they come with the risk of rising payments if interest rates increase. Lenders may take this risk into account when deciding how much you can borrow.

Affordability Calculators and Mortgage in Principle

Before you start searching for homes, it’s a good idea to use an affordability calculator. These tools can give you a rough idea of how much you might be able to borrow based on your income, outgoings, and other factors. Many lenders and comparison sites offer free calculators that can help you get started.

In addition to using an affordability calculator, it’s also worth getting a Mortgage in Principle (MIP). An MIP is an indication from a lender of how much they might be willing to lend you, based on an initial assessment of your financial situation. While it’s not a guaranteed offer, having an MIP can make you a more attractive buyer to sellers, as it shows you are serious and have taken steps to secure financing.

Homesearch Properties can guide you through this process, helping you understand your borrowing power and ensuring you have the right tools to make informed decisions. With an MIP in hand, you can begin searching for homes with confidence, knowing what your budget allows.

Hidden Costs and How They Affect Borrowing

When calculating how much you can borrow, it’s essential to consider the hidden costs of buying a home. These costs can add up quickly and impact how much you have available for your mortgage deposit and monthly repayments.

1. Stamp Duty

Stamp Duty Land Tax (SDLT) is a significant expense when buying a property in the UK. The amount you pay depends on the value of the property and whether you’re a first-time buyer. Stamp duty can take a large chunk out of your budget, so it’s important to factor this into your calculations.

2. Legal Fees

You’ll need to hire a solicitor or conveyancer to handle the legal aspects of buying a property. Legal fees can vary, but they typically range from £500 to £1,500. These costs need to be factored into your overall budget.

3. Survey Costs

Before you buy a property, it’s wise to have a survey carried out to check for any structural issues. There are different types of surveys, ranging from basic valuations to full structural surveys, with costs ranging from a few hundred to over a thousand pounds.

4. Moving Costs

Don’t forget to budget for the cost of moving. This includes hiring a removal company, which can cost several hundred pounds, depending on the distance and the amount of belongings you have.

5. Home Insurance

Lenders will require you to have buildings insurance in place before they release the funds for your mortgage. Home insurance is another ongoing cost that needs to be included in your budget.

Homesearch can help you identify and plan for these hidden costs, ensuring that you have a realistic budget and don’t overstretch yourself financially.

How Homesearch Properties Can Help

When it comes to finding the right property, Homesearch Properties is your ideal partner. With extensive knowledge of the Homesearch London property market, Homesearch Properties can help you find homes that match your budget and borrowing capacity. By working closely with you, Homesearch Properties ensures that your property search is focused and effective, saving you time and helping you avoid homes that are out of your financial reach.

Moreover, HSP can connect you with trusted mortgage advisors who can guide you through the borrowing process, ensuring you secure the best possible mortgage deal. Whether you’re a first-time buyer or looking to upgrade to a larger home, Homesearch Properties is committed to making your home-buying journey as smooth and stress-free as possible.

Conclusion

Understanding how much you can borrow for a home loan is a critical step in your property search. By considering your income, outgoings, credit history, and deposit, and understanding the impact of interest rates and mortgage types, you can make informed decisions about your borrowing capacity.

With the right support from Homesearch Properties, you can navigate the complexities of the mortgage market, find homes within your budget, and move one step closer to securing your dream home. Whether you’re searching for homes in London or beyond, Homesearch is here to help you every step of the way.

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Capital gains tax speculation leads to ‘significant increase in market appraisal’

Rachel Reeves

There are growing that potential tax changes in the Autumn Budget next month may curb demand and increase downwards pressure on prices in higher-value markets

Rachel Reeves has not yet delivered her Budget but it is already having repercussions in the property market.

The government has said private schools will be charged VAT from January, but other announcements on 30 October may focus on capital gains tax (CGT), non doms, pension tax relief and inheritance tax.

By Tom Bill, head of UK residential research at Knight Frank, commented: “While there was a 34% increase in the number of sales in London in July and August compared to the five-year average, there was a 16% decline above £2 million, Knight Frank data shows.

“When you consider that £2 million-plus sales accounted for 22% of the £11.7 billion raised in stamp duty last year, it highlights the risk of tax rises having unintended consequences.

“The other way in which the Budget is impacting the property market relates to CGT and speculation that it may increase from its current level of 24%.

“Supply looks set to rise this autumn, which will be driven in part by owners attempting to sell before any changes are introduced.”

In an indication that more sellers are planning to list their property, the number of market valuation appraisals in August was 25% above the five-year average in London, Knight Frank data shows. Any future rise in supply would increase downwards pressure on prices.

“We are seeing a significant increase in market appraisals and listings from clients who have residential lettings portfolios,” said Andrew Groocock, chief operating officer of Knight Frank’s estate agency business.

“There is a feeling among many owners that they are better off bringing their properties to the market now and perhaps accepting a price that is 5%-10% lower, rather than running the risk of a CGT increase after the Budget.”

Average prices in prime central London (PCL) continued to edge down on a monthly basis in August. A fall of 0.2% took the annual change to -2.3%, which was the 16th month in a row the annual change was negative.

In fact, annual price growth in PCL has not been above 3% since March 2015 and prices remain 18% down on their last peak in August 2015.

Prices in prime outer London were flat in the 12 months to August as lower-value, needs-driven property markets perform more strongly. By comparison, prices in POL are 8% below their last peak in July 2016.

As far as lettings is concerned, rental value growth continued its return to earth in August as supply climbed and demand fell. Overall, rents rose 2.1% in prime central London (PCL) and 2.2% in prime outer London (POL).

In both cases, it was the lowest figure since the summer of 2021 when the long-let market was flooded with short-let properties during the pandemic. Supply subsequently fell sharply, in part thanks to landlords selling up during a stamp duty holiday, which meant rents were growing by more than 20% in the early months of 2022 as demand far exceeded supply.

The chart below shows how the market has rebalanced and put downwards pressure on rents.

The number of new listings in August was 8% below the five-year average, Rightmove data shows. That compares to much steeper declines in recent years.

Meanwhile, the number of new prospective tenants was 11% below the five-year average in August, partly due to a decline in overseas students applying to study in the UK.

The number of students accepted from China, which accounted for the largest proportion of overseas students in 2021/22, dropped 6% to 10,950 this year, according to UCAS data.

UK universities may have reached “peak China”, according to comments last year from the head of the Universities and Colleges Admissions Service, for reasons that include visa and tax changes as well as the fact rents have risen in recent years.

“International students coming to the UK are tending to focus on London more closely than other cities” said John Humphris, head of Relocation & Corporate services at Knight Frank. “With fluctuations in applications from China, but notable increases from Turkey and Canada, London remains an evergreen destination in spite of competition from other global education hubs, notably Australia”

Average rents in PCL are 34% higher than they were before the pandemic in February 2020, while the equivalent rise in POL is 29%.

While rents are normalising, there is a risk that upwards price pressure may intensify as more landlords sell due to possible legislative changes.

First, there is speculation that capital gains tax may increase from its current level of 24% in next month’s Budget.

In an indication that more sellers are planning to list their property ahead of possible changes, the number of market valuation appraisals for sale in August was 25% above the five-year average in London, Knight Frank data shows. Conversely, any future rise in supply would increase downwards pressure on prices.

“We are seeing a significant increase in market appraisals and listings from clients who have residential lettings portfolios,” said Andrew Groocock, Chief Operating Officer of Knight Frank’s estate agency business.

“There is a feeling among many owners that they are better off bringing their properties to the market now and perhaps accepting a price that is 5%-10% lower, rather than running the risk of a CGT increase after the Budget.”

Second, there is uncertainty over the revived Renter’s Reform Bill, as previously explored. Measures could include making it harder to evict tenants and tighter rules around the green credentials of lettings properties, according to recent press reports.

Original Post from https://propertyindustryeye.com

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How the Renters’ Rights Bill differs from the Renters (Reform) Bill

How the Renters’ Rights Bill differs from the Renters (Reform) Bill

Is the Renters’ Rights Bill much different from the Renters (Reform) Bill, on whose shoulders it stands?

In this blog post, I compare the new Renters’ Rights Bill and the Renters (Reform) Bill in a user-friendly side-by-side table to make it easy to see what is new, what has changed and what has gone. I then expand on the differences between the two Bills in the text, to explain what it means for landlords.

This analysis of the Renters’ Rights Bill is one of the first, if not the first, to be published. I’m happy for people to take inspiration from my analysis for their own content, provided they properly credit my efforts with a backlink 😊

At a glance: Renters’ Rights Bill versus Renters (Reform) Bill

Side-by-side comparison of Renters’ Rights Bill with Renters (Reform) Bill

Although the Renters’ Rights Bill is very similar to the Renters (Reform) Bill, there are some significant differences.

This table compares the key provisions side-by-side to show how the Renters’ Rights Bill compares and contrasts with the Renters (Reform) Bill to make it easier to spot the differences at a glance. I go into the detail in the rest of the blog post.

 

Key provisions Renters (Reform) Bill Renters’ Rights Bill
Abolition of Section 21 Yes Yes
Lord Chancellor’s assessment of county court eviction process before Section 21 abolished for existing tenancies Yes No
Abolition of fixed term tenancies Yes Yes
Minimum 6 month tenancy Yes No – tenant can terminate with 2 months’ notice at any time
Abolition of Assured Shorthold Tenancies, conversion to Assured Tenancies Yes Yes
Rent increase only by Section 13 notice Yes Yes
Change to power of First-tier Tribunal to determine new rent No Yes – FTT cannot increase rent higher than proposed rent
Right for tenant to request consent to keep pet Yes Yes – shorter timelines for response from landlord
No bans on children or benefit claimants Yes Yes
Requirement for advertising to state proposed rent No Yes – new provision
Ban on inciting / encouraging / accepting offer for higher rent No Yes – new provision
Remedying hazards (Awaab’s Law) No Yes – new provisions extend it to private rented sector
Landlord Redress Scheme (Ombudsman) Yes Yes
PRS Database (Property Portal) Yes Yes
New offences for Rent Repayment Orders Yes Yes – PLUS additional offences
Increase of Rent Repayment Order maximum from 12 to 24 months’ rent Yes Yes
Closing the “AST Trap” for long leases Yes Yes
Decent Homes Standard for PRS Yes Yes
Notice periods for Section 8 Reduced Increased
New Mandatory Ground 1A (sale of property) Yes – after 6 months Yes – after 1 year
New Mandatory Ground 4A for student accommodation Yes – tenants are full-time students Yes, but only for HMOs
New Mandatory Ground 8A for serious repeated rent arrears Yes No
Wider wording for Discretionary Ground 14 for anti-social behaviour Yes No

What’s new in Renters’ Rights Bill – not in Renters (Reform) Bill?

Whilst the Renters’ Rights Bill is largely similar to the Renters (Reform) Bill, the Renters’ Rights Bill has a number of provisions that were not in the Renters (Reform) Bill or which differ that Bill. Most were trailed in Labour’s 2024 King’s Speech and were proposed by Labour as amendments at the Report Stage of the Renters (Reform) Bill:

1. Ban on encouraging or inviting rental bidding, or accepting higher rent

It’s no surprise that the new Bill contains wording that prohibits “rental bidding”, ie inviting or encouraging applicants to offer to pay rent that’s higher than the amount in the listing.

However, the Bill goes a little further in that it also stops landlords from accepting an offer from an applicant to “pay an amount of rent under the proposed letting that exceeds the stated rent”.

This means that even if a tenant offers to pay more than the stated rent, without any encouragement, the landlord won’t be able to accept it.

The prevention of rental bidding was mentioned in the King’s Speech, and Matthew Pennycook tabled an amendment to this effect at the Report Stage of the Renters (Reform) Bill.

The Bill gives the local authority the power to impose a fine of up to £7,000 if they are satisfied “on the balance of probabilities” that the landlord or agent breached this obligation.

2. Requirement for advertising to state proposed rent

There is a new obligation for landlords and letting agents to state the proposed rent when advertising the property for let. This is needed for the ban on rental bidding.

That said, there’s no requirement to state the rent on a “To Let” board outside of a property.

3. Changes to the Section 13 rent process

As expected, the Bill changes the powers of the First-tier Tribunal under Section 14 of the Housing Act 1988.

As the Guidance explains: “Currently, tenants face the risk that the Tribunal may increase rent beyond what the landlord initially proposed – we will end this, so tenants never pay more than what the landlord asked for”.

This means that if a tenant challenges a rent increase in a Section 13 notice at the First-tier Tribunal, if the market rent is higher than the rent in the s13 notice, the tribunal will not be able to increase the rent to the market rent, as is the case now.

This was referred to in the King’s Speech, and Matthew Pennycook tabled an amendment to the Renters (Reform) Bill with a similar effect at the Report Stage.

There are a couple of new details in the Bill. As the Guidance explains, the Bill will “end the practice of backdating rent increases – with the new rent instead applying from the date of the Tribunal determination”.

Also, the First-tier Tribunal will be able to delay the implementation of the rent increase by up to two months: “in cases of undue hardship, we will give the Tribunal the power to defer rent increases by up to a further 2 months”.

This will undoubtedly increase the number of appeals to the First-tier Tribunal, as tenants will have nothing to lose, and the start date of the higher rent will be delayed.

Related Post: The new rules about rent in the Renters’ Rights Bill

4. Remedying hazards (Awaab’s Law)

Again, this addition comes as no surprise because it was specifically mentioned in the King’s Speech.

“Awaab’s Law” is an amendment to Section 10A of the Landlord and Tenant Act 1985 which was introduced by Section 42 Social Housing (Regulation) Act 2023 to require social housing providers to remedy hazards within a certain timeframe. The law was introduced after the death of Awaab Ishak in 2020 caused by the inhalation of mould in his parents’ social housing flat.

There is no detail in the Bill about how Awaab’s Law will be implemented for the private rented sector.

However, the Guidance states: “We recognise that there are differences between the private and social rented sectors. We will carefully consider how best to apply Awaab’s Law to the private rented sector in a way that is fair, proportionate and effective for both tenants and landlords, and will consult on this. We will set out further detail on our plans in due course”.

Related Post: Awaab’s Law and other new social housing laws

5. Additional offences for Rent Repayment Orders

The Bill adds the following extra offences to the list in Section 40 Housing and Planning Act 2016, for which the First-tier Tribunal can impose a Rent Repayment Order, over an above those in the Renters (Reform) Bill:

  • Knowingly or recklessly mis-using a possession ground
  • Breach of restriction on letting or marketing a property
  • Tenancy reform: continuing breaches

Related Post: The new Rent Repayment Order rules in the Renters’ Rights Bill

What’s missing from Renters’ Rights Bill that was in Renters (Reform) Bill?

The Labour government has omitted from the Renters’ Rights Bill the following four key provisions that were in the Renters (Reform) Bill:

1. No minimum 6 month tenancy

One of the amendments to the Renters (Reform) Bill at the Report Stage was that tenants needed to wait 4 months before serving 2 months’ notice to quit, instead of serving 2 months’ notice at any time. This effectively created a minimum tenancy period of 6 months.

Jacob Young explained the reason for this in the Report Stage debate of the Reform Bill: “The change ensures that landlords are able to recover the costs of replacing tenants and will prevent tenants from using PRS properties as short-term or holiday lets”.

In the same debate, Matthew Pennycook criticised the clause for the following reason: “the proposed six-month initial period will not only trap large numbers of tenants in unsafe and unsuitable properties, but put at risk the coherence of the tenancy regime that is at the heart of the Bill”.

The Renters’ Rights Bill does not create a minimum period and renters can serve a notice to quit straight away, even on day one of the tenancy. In the parts of the country where Airbnb is popular, this will create concern for landlords.

The Explanatory Notes to the Rights Bill (para 176) say that the “default period of notice required is not less than two months before the end of a period of the tenancy”. A landlord can agree to a shorter period, either in the tenancy agreement or in a separate document”.

It also calls into question the business model of letting agents that charge a large up front sum of, say, one month’s rent for a tenant find. I foresee that even more landlords will use online letting agents and bypass high street agents.

2. No new Mandatory Ground 8A for serious repeated rent arrears

The new Mandatory Ground 8A for serious rent arrears in the Renters (Reform) Bill is not in the Renters’ Rights Bill.

This is not surprising. Labour criticised this provision during the passage of the Renters (Reform) Bill through parliament. Matthew Pennycook said in Committee that the case for the new Ground 8A was “threadbare” and “could lead to a great many vulnerable tenants being evicted. It is a punitive and draconian measure that will cause great hardship”.

He added that it had been incorporated into the Bill “purely at the behest of those voices in the landlord lobby who have been forced to accept, but are by no means happy about, the wider reforms contained in this legislation [the Renters (Reform) Bill].”

3. No wider wording for Discretionary Ground 14 for anti-social behaviour

The Renters (Reform) Bill included a slight change to Ground 14 to include tenant behaviours that are “capable of causing” nuisance or annoyance. At present, landlords need to show that behaviour was “likely to cause” a nuisance or annoyance.

When the Renters (Reform) Bill was in Committee, Matthew Pennycook said of the change to Ground 14: “the range of behaviours that might be interpreted as falling within the definition of ‘capable of causing nuisance or annoyance’ is so expansive that even families with high-spirited children renting privately might fall foul of it”.

This change to Ground 14 is not in the Renters’ Rights Bill.

4. No Lord Chancellor’s assessment before implementation of s21 abolition

When the Renters (Reform) Bill was at the Report Stage, the then Junior Housing Minister, Jacob Young, introduced a new clause that required the Lord Chancellor to assess the operation of the county court possession order process and enforcement before the abolition of Section 21 would apply to existing tenancies.

The then government had introduced this clause after concerns from Conservative backbenchers that the country courts would not be ready for the influx of applications for orders for possession under Section 8.

Matthew Pennycook criticised the new clause when the Bill was debated at the Report Stage on the grounds there was no timescale, no metrics, no obligations and nothing to compel the government to take measures “to make the courts ready for the new system”.

He added that they had “heard extensive evidence in Committee about the fact that the system is essentially working fairly well and is recovering well from covid”.

Unsurprisingly, there is no Lord Chancellor’s assessment in the Renters’ Rights Bill.

The government press release states “the Bill will abolish Section 21 evictions for both new and existing tenancies at the same time, giving all private renters immediate security and assurance”.

Which provisions are different in the Renters’ Rights Bill?

Here are the provisions that were in the Renters (Reform) Bill, but the detail of which has been changed in the Renters’ Rights Bill.

1. Longer notice periods for landlords using Section 8 possession procedure

The Renters’ Rights Bill has longer notice periods than the Renters (Reform) Bill for some Section 8 grounds for possession.

Here are some examples of the longer notice periods:

  • Ground 1 (occupation by landlord or family): 4 months from date of service of notice, instead of 2 months, and it cannot take effect in the first 12 months of a tenancy instead of 6 months in the Renters (Reform) Bill.
  • Ground 1A (sale of property): 4 months from date of service of notice, instead of 2 months, and it cannot take effect in the first 12 months of a tenancy, instead of 6 months in the Renters (Reform) Bill.
  • Ground 4A (student HMOs for occupation by full-time students): 4 months from date of service of notice, instead of 2 months
  • Ground 6 (redevelopment by landlord): 4 months from date of service of notice, instead of 2 months

On the other hand, the notice period for Ground 8 (serious rent arrears) is unchanged, remaining at 4 weeks from date of service of notice.

2. New Mandatory Ground 1A cannot take effect until 12 months into tenancy, instead of 6 months

Landlords will be happy that the new Mandatory Ground 1A in the Renters (Reform) Bill (which allowed landlords to obtain possession where they intended to sell) is also in the Renters’ Rights Bill.

However, whereas the notice could take effect at the 6 month stage of a tenancy under the Renters (Reform) Bill, the relevant date when the notice expires will need to be at least 12 months into the tenancy. The 12 months will start from the beginning of the tenancy, even if that’s before Royal Assent of the Bill or when it comes into effect. In other words the clocks won’t restart when the new regime comes into force.

Landlords will need to give 4 months’ notice instead of the 2 months in the Renters (Reform) Bill, as mentioned above.

There are tough rules to make sure landlords genuinely do want to sell. They won’t be able to re-market or re-let the property for 12 months from the date the notice is served until the date the notice expires, or from the date they serve the particulars of claim if they serve a possession claim.

This has teeth as landlords may be fined up to £7,000 by the local authority if they break these rules.

3. New Mandatory Ground 4A restricted to students in HMOs

The original version of Mandatory Ground 4A (student accommodation for occupation by students) in the Renters (Reform) Bill was limited to HMOs. This restriction was lifted in the Report Stage so that it would apply to all full-time students, and not just those living in an HMO.

The Renters’ Rights Bill limits Ground 4A to full-time students in an HMO, as per the original draft of the Renters (Reform) Bill. In other words, if a full-time student rents a property by themselves or with another full-time student, the landlord won’t be able to use Ground 4A. Equally, if even one of the students in the HMO is part-time (for instance, doing a part-time Masters or PhD, which is very common), this new ground won’t be available.

4. Change to Mandatory Ground 8 (serious rent arrears)

The Bill changes Ground 8 so that the rent arrears need to be three months, up from two months, both at the time the notice is served and at the hearing. The notice is 4 weeks, an increase from the 2 weeks at present.

There had been some speculation that this would become a discretionary ground or subject to a hardship test, but this is not the case.

5. Longer notice period for Section 13 rent increase

At present, a landlord can increase rent using a Section 13 notice on Form 4, giving at least one month’s notice to start at the beginning of a new rent period.

The Renters’ Rights Bill increases the notice period from one month to two months, and it won’t come into effect until a determination by the First-tier Tribunal, if the tenant chooses to challenge the increase.

Related Post: The new rules about rent in the Renters’ Rights Bill

6. Shorter time limits for landlords to approve pets

Instead of allowing landlords the 42 days to consider requests for consent to keep pets that was in the Renters’ (Reform) Bill, the time limit has been reduced to 28 days in the Renters’ Rights Bill.

Is there a new “hardship” test for Section 8 mandatory grounds for possession in the Renters’ Rights Bill?

No. During August, the Daily Telegraph claimed that ministers were “considering bringing in French-style ‘hardship tests’ that would have to be carried out before landlords could evict tenants, effectively banning evictions in cases where renters were found to be worse off”. The Telegraph did not quote a government source in the article.

Whilst we do not know if ministers were considering hardship tests, they are not in the Renters’ Rights Bill.

This means that for Mandatory Grounds, the courts will continue to have no choice but order possession where landlords can prove they satisfy the requirements of the relevant ground.

Related Post: How to evict tenants and obtain possession under Section 8

Are there rent controls in the Renters’ Rights Bill?

No. Landlords are free to increase their rent to whatever level they believe is appropriate. However, they will need to use the process in Section 13, and the First-tier Tribunal will continue to have the power to reduce any proposed rent if it is above the open market value for a similar property in that area.

The Ministry of Housing, Communities and Local Government confirmed in a press release on 15 August that it had “no plans whatsoever to devolve rent control powers”.

When will the Renters’ Rights Bill come into effect?

Unlike the Renters (Reform) Bill, the Renters’ Rights Bill will abolish Section 21 in one go “as quickly as possible”, with a single date, and not with the two-tier system in the Renters (Reform) Bill. In other words, a “big bang” date where all tenancy agreements will move to the new system on the same day.

Matthew Pennycook told the BBC on 11 September they hoped the Bill would “make very quick progress through the House of Commons and that we have that new tenancy system in place within the first half or around summer next year.” In other words, the Renters’ Rights Bill is likely to come into effect by the summer of 2025 at the latest.

The Guidance states that on the implementation date, “the new tenancy system will apply to all private tenancies – existing tenancies will convert to the new system, and any new tenancies signed on or after this date will also be governed by the new rules. Existing fixed terms will be converted to periodic tenancies, and landlords will no longer be able to serve new section 21 or old-style section 8 notices to evict their tenants. This single date will prevent a confusing 2-tier system, and give all tenants security immediately”.

The Guidance adds there will ensure a “smooth transition and avoid unnecessary ‘cliff edges’, for example maintaining the validity of rent increases and notices served prior to implementation”.

Related Post: Renters’ Rights Bill: What happens when?

Final thoughts

Instead of rushing a short Bill through parliament that would abolish Section 21 “no fault” evictions, the government have used the Renters (Reform) Bill to create the Renters’ Rights Bill.

As the table above shows, the government have not just done a cut and paste job, but have made a number of changes to address some of the issues they raised when the Renters (Reform) Bill was going through the House of Commons, particularly those at the Report Stage. They have also simplified the implementation with a “big bang” date.

Renters will be disappointed there is not a hardship test for Section 8 evictions, there are no rent controls, and landlords will still be able to evict them if they wish to sell up.

Landlords will be disappointed there is no 6 month minimum tenancy period, no fixed term period for student landlords, no additional serious rent arrears ground for possession and no linking of the abolition of Section 21 for existing tenancies to court reform. They will also be disappointed that even fair increases will be delayed if the tenants challenge them at the First-tier Tribunal.

On the other hand, many of the provisions from the Renters (Reform) Bill that will benefit the wider PRS remain in the Bill. These include the PRS database, Landlord Ombudsman, extending the Decent Homes Standard to the private rented sector and widening the scope of rent repayment orders. Although, for most of these, we await the detail.

Finally, landlords will be pleased that Labour have retained the new Mandatory Ground 1A from the Renters (Reform) Bill. This “no fault eviction” will enable landlords to obtain an order for possession if they want to sell their property. Having to wait 12 months into the tenancy before the notice can expire, instead of the 6 months in the Renters (Reform) Bill, seems to me to be a fair compromise.

Original Post: https://theindependentlandlord.com

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How buy-to-let landlords selling up can recoup capital gains tax AND boost their pension in one move

Jumping ship? Some landlords may be looking to get out of the market as CGT hikes loom

With the Autumn Budget looming large in the minds of landlords, some have decided to sell up in order to avoid higher costs now and a possible capital gains tax raid in future.

The fear among buy-to-let owners is that Chancellor Rachel Reeves, will massively hike CGT in the Budget, as part of her bid to fill her claimed ‘£22billion black hole’ in the UK’s finances.

Currently, higher-rate taxpayer landlords would pay 24 per cent on gains they make on their properties, but this could increase to 40 per cent if the Chancellor decided to bring capital gains tax in line with the rate of income tax.

Regardless of a potential CGT raid, more buy-to-let landlords are already selling up. However, many will be left wondering how to save or invest the proceeds after the sale of their property is completed.

Paying into a pension could prove to be a lucrative move, as it could effectively recoup money lost to capital gains tax and boost their retirement pot.

Putting cash into their pension would fit with the investing strategy of many landlords, who use property investments as a nest egg for retirement.

Pension tax relief means landlords could claw back some money lost to capital gains tax. They can contribute as much as the £60,000 annual allowance this year to a pension and potentially more if they have previous years to carry forward.

Steven Cameron, pensions director at Aegon, said: ‘There’s widespread speculation that the Autumn Budget could bring increases to the rates of capital gains tax and possible changes to pensions taxation, such as the loss of higher or additional rate tax relief on personal contributions.

‘The threat of more penal rates of CGT is reported to be prompting many landlords to consider selling rental properties.

‘This is reshaping the longstanding debate between investing in property versus a pension, particularly relevant to those people who might regard second properties as their retirement saving.’

‘Those considering selling a rental property might consider investing the proceeds in a pension or stocks and shares Isa.’

Landlords are taking note of the speculation on capital gains tax but it is pressure elsewhere that is prompting many to sell.

Higher mortgage rates, less generous mortgage interest tax relief, greater regulation, the cost of energy efficiency improvements and other increased bills are encouraging more to cash in gains and move on.

There are other reasons landlords may be looking to sell, however.  These include higher mortgage rates and the Renters’ Rights Bill which will make it harder to evict tenants without a good reason.

Should you reinvest your cash into a pension?

As a buy-to-let owner, it’s unlikely that you could put your property on the market now and sell it before the Budget on 30 October.

But those that are already in the process may find themselves quids in before that date rolls around.

Capital gains tax is charged on annual profits on assets of more than £3,000. As it stands, landlords who are in the process of selling will face 24 per cent CGT if they are higher rate or additional rate taxpayers.

Basic rate taxpayers face capital gains tax at 18 per cent but gains are added to their other income to decide the rate – meaning they could be pushed into the higher rate bracket.

Landlords could consider paying the proceeds of their sale into a self-invested personal pension, known as a Sipp, as a way to claw back their CGT loss on the sale, and provide a boost to their pension in one fell swoop.

Pension contributions for most people automatically qualify for basic rate tax relief from the Government.

In order to take savers back to the position they were in before 20 per cent tax, contributions get a 25 per cent uplift – turning £80 paid in back into £100 pre-tax, for example.

Higher rate and additional rate taxpayers can claim the rest of their tax relief through self-assessment, delivering 40 per cent and 45 per cent tax relief on contributions.

The annual allowance – and need to be a high earner

There is a pension annual allowance that caps contributions eligible for tax relief at £60,000 per year, so for those making big profits it might take a number of years to contribute the funds from the property sale.

However, savers can carry forward unused allowances from up to three years previously, provided they were part of a registered pension scheme during those years. This would include a workplace pension scheme.

People can also only get tax relief on private pension contributions worth up to 100 per cent of their relevant annual earnings.

Neither rent or capital gain on a property will count as annual earnings for this, meaning that to pay the maximum into a pension, someone would generally need to earn £60,000 from employment or self-employment.

Those who have previously flexibly withdrawn money from a pension may have a lower £10,000 annual allowance.

Very high earners with adjusted incomes of more than £260,000 have their annual allowance tapered down.

Savers should also realise that withdrawals from their pension scheme will be taxed beyond the first 25 per cent, which is tax-free.

Cameron explained: ‘The pension annual allowance is currently £60,000, with the potential to carry forward unused allowances from the past three years.

‘In some circumstances, making a personal pension contribution, could also result in some or all of the capital gain from the rental property sale being taxed at the basic rate of CGT, 18 per cent, rather than the higher rate 24 per cent.

‘Paying into a pension means you can’t access your funds, currently until age 55 but rising to 57 in 2028. However, you could qualify at present for tax relief at your highest marginal income tax rate.’

According to data from the Institute for Fiscal Studies, between 30 and 40 per cent of private sector employees, equating to between 5 and 7million people, are on course to see their workplace pension fail to meet the requirements for a minimum standard of living.

Diverting your money into a pension also gives you access to a tax-friendly wrapper which will allow your investments to grow without facing further capital gains, dividend and income tax.

Landlords making big gains and considering paying into a pension would be wise to speak to a specialist tax or financial adviser, who can help explain their options and make sure things are done correctly.

 

What CGT changes could mean for property investors
Capital gain Current basic If aligned Impact Current higher If aligned Impact Current additional If aligned Impact
Gain 18% 20% 24% 40% 24% 45%
£10,000 £1,260 £1,400 £140 £1,680 £2,800 £1,120 £1,680 £3,150 £1,470
£20,000 £3,060 £3,400 £340 £4,080 £6,800 £2,720 £4,080 £7,650 £3,570
£30,000 £4,860 £5,400 £540 £6,480 £10,800 £4,320 £6,480 £12,150 £5,670
Source: Quilter 

What if capital gains tax is hiked in the Budget?

It looks highly likely that capital gains tax rates will be raised in the Budget.

It has been suggested that Rachel Reeves could equalise CGT with income tax and change the higher rate to 40 per cent, and the additional rate to 45 per cent. Basic rate taxpayers could see a lesser increase to 20 per cent.

Of course, if any Budget changes do come in, they might not be as extensive as landlords fear – and they might not come into force immediately.

Economists have warned against raising capital gains tax rates to as high as income tax rates without bringing in indexation, so that only gains above inflation are taxed.

If capital gains tax was raised to income tax levels and pension tax relief remained the same, landlords could potentially recoup their CGT by paying profits into a pension.

Landlords should also consider making use of their Isa allowance in order to benefit from another tax wrapper.

With an annual Isa limit of £20,000, this combined with paying £60,000 into a pension could allow themto place up to £80,000 of proceeds into tax-efficient accounts, without having carried forward any pension allowances.

Unlike pensions, Cameron said, ‘Isas offer tax-incentivised savings without locking your money away.

 

Selling out: Landlords purchased just 10% of all homes sold during the first half of this year, the lowest share seen since 2010 according to the estate agent Hamptons
Selling out: Landlords purchased just 10% of all homes sold during the first half of this year, the lowest share seen since 2010 according to the estate agent Hamptons

 

How many landlords are selling up?

Figures from Rightmove show that 18 per cent of homes currently up for sale were previously available to rent. This compares with just eight per cent in 2010.

In London, this figure rises to almost a third of homes having previously been available to rent. In the North East and Scotland, 19 per cent were previously rented.

Meanwhile, data from Hamptons reveals that the number of homes being bought by landlords has dropped to a 14-year low.

Original Post from https://www.thisismoney.co.uk

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Rates cut on wide range of buy to let and holiday let mortgages

Rates cut on wide range of buy to let and holiday let mortgages

Suffolk Building Society is taking up to 30bps off its fixed Buy to Let, Buy to Let Light Refurbishment, Expat Buy To Let and Holiday Let products.

It is also slicing up to 30 bps off its 95% resi mortgages, giving an affordability boost to first time buyers and those with smaller deposits.

A society spokesperson says: “We’re pleased to be able to offer landlords more affordable rates across various Buy To Let product types to help lower their monthly costs. And of course, lower payrates help with BTL affordability, enabling them to access the loan amounts they require.

“As well as new regulations around energy efficiency and the introduction of a new Decent Homes Standard requiring improvements, landlords are also facing further changes from the upcoming Renters’ Rights Bill. In addition, the Budget may bring further change. As a result, landlords face uncertainty so saving money where possible is always a positive.”

She adds: “With house prices still rising, and the average UK house price standing at £289,723, there’s a clear need to support first time buyers with their property ownership ambitions. First time buyers are in the spotlight at the moment and rightly so.

“With the cost of living and the ability to save up a sizeable deposit becoming even more challenging, higher LTV products go some way to help those looking to get on the property ladder. It also provides an alternative for those looking to remortgage and borrow extra for home improvements too.

The following are now available for both purchase and remortgage:

Buy to Let

  • 80% LTV 2 Year Fixed capital and interest has been reduced by 20bps to 5.39%, max loan £1m.
  • 80% LTV 5 Year Fixed capital and interest has been reduced by 30bps to 5.19%, max loan £1m.

Buy to Let Light Refurbishment

  • 80% 2 Year Fixed capital and interest has been reduced by 20bps to 5.49%, max loan £1m.
  • 80% 5 Year Fixed capital and interest has been reduced by 30bps to 5.29%, max loan £1m.

Expat Buy to Let

  • 80% 2 Year Fixed capital and interest has been reduced by 16bps to 5.69%, max loan £1m.

Holiday Let

  • 80% 2 Year Fixed capital and interest has been reduced by 14bps to 5.55%, max loan £1m.

Residential

  • 95% LTV 2 Year Fixed capital and interest has been reduced by 30bps to 5.39%, max loan £500,000
  • 95% LTV 5 Year Fixed capital and interest has been reduced by 24bps to 5.05%, max loan £500,000

Original Post from https://www.landlordtoday.co.uk

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Supply-demand imbalance narrows as rates fall

Tom Bill

For the property market, there are strong parallels between January and September this year, according to Knight Frank.

The number of sub-4% mortgages is growing as financial markets bet on multiple rate cuts over the next year as inflation is tamed. It was a similar story in the early weeks of 2024.

Knight Frank’s head of residential research, Tom Bill, points out that the catch last time was that underlying inflation did not come under control as quickly as headline inflation and any new year optimism had faded by the middle of February.

So, what’s the hurdle now following a 0.5% rate cut by the US Federal Reserve last week and a UK services inflation reading (5.6%) in August that met expectations?

“The snag this time is political rather than economic,” Bill explained. “Uncertainty hangs in the air ahead of the Budget on 30 October.”

He continued: The government has warned it will be “painful” and speculation has focussed on changes to inheritance tax, capital gains tax and pension tax relief among others.”

Consequently, buyers are more cautious than they were in January, as the chart shows.

The number of new prospective buyers in the four weeks to 14 September in the UK was 15% below the five-year average, Knight Frank data shows. Meanwhile the number of market valuation appraisals (which are requested by owners looking to sell) was 12% higher.

Furthermore, there was an average of 6.7 new buyers for every new sales instruction in the same period, which compared to a figure of 16 in early January, underlining the strength of demand at the start of the year.

Despite the comparable interest rate outlook, buyers have been slower to come forward in September than January.

“Lenders have brought down their rates ahead of what should be a busy autumn period,” said Simon Gammon, head of Knight Frank Finance, citing the fact that a sub-4% two-year fixed-rate deal was now available. “We just need the property market to respond now.”

One of the reasons that sellers are more active is the possibility that capital gains tax will rise in the Budget from its current level of 24% for higher-rate taxpayers. Some second home-owners and landlords sitting on taxable gains are looking to sell before 30 October.

But Knight Frank does not expect meaningful downwards pressure on prices over the final months of 2024; the agency’s latest UK forecast is 3% price growth in 2024.

Bill added: “Demand has evidently picked up to some extent as rates drop, but sellers should be aware that buyer exuberance will be in short supply, particularly this side of the Budget. People are also still rolling off favourable fixed-rate deals agreed in recent years when rates were low.

“A Budget that is less painful than feared could therefore trigger a relief bounce and higher levels of housing market activity, which would be positive for the whole economy. Each transaction adds £10,000 on average to GDP, estimates from Knight Frank and the HBF have shown.

“It could also have the reverse effect, particularly in higher-value markets.

“Either way, the biggest obstacle – uncertainty – will be overcome in five weeks’ time.”

Original Post from propertyindustryeye.com

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New housing policies: Angela Rayner’s speech at Labour Party Conference

Angela Rayner

Angela Rayner set out measures to protect renters from fire safety defects, damp and mould in her speech at the Labour Party conference yesterday.

The deputy prime minister and housing secretary, committed to “building homes fit for the future”, while also pledging to bring forward a Remediation Acceleration Plan this autumn to speed up the removal of unsafe cladding on high-rise buildings.

Other measures Rayner announced on Sunday included consulting on a new “decent homes standard” for the social and private rented sectors, and a new law to make landlords respond to complaints about disrepair within legally binding timescales.

Here is part of Rayner’s speech relating to housing at the Labour Party Conference yesterday:

“14 years of Tory chaos has not just left its mark on people’s jobs, but on homes too.

Not enough are being built. The Tories failed to meet their targets year, after year, after year.

Michael Gove handed back nearly £2 billion to the Treasury in unspent housing funds. Mortgages have soared. Leaseholders are left at the mercy of eye-watering charges. Renters face crippling rent hikes in damp and mouldy homes. Homelessness is all around us.

The simple aspiration of a safe, secure and affordable home is further out of reach than ever and we can’t go on like this. So change must begin at home.

We are tackling the Tories’ housing emergency.

We will get Britain building and building decent homes for working people.

A new planning framework will unlock the door to affordable homes and provide the biggest boost to social and affordable housing in a generation.

And Conference, our renters’ bill will rebalance the relationship between tenant and landlord and end no fault evictions – for good.

Our long-term plan will free leaseholders from the tyranny of a mediaeval system.

And a cross-government taskforce will put Britain back on track to ending homelessness.

Whether you’re a leaseholder, a tenant, a home-buyer or without somewhere to live – this government is on your side.

But my mission is not just to build houses, it is to build homes.

Because we cannot build at any cost. These new homes must be warm, secure and most importantly safe.

We will give families the security they need to have the best start in life.

I know first-hand the difference a decent home can make.

When I was growing up we didn’t have a lot. But we had a safe and secure home. Today, not everyone does.

Working with the Prime Minister on the Grenfell Inquiry was the most sobering moment of my career: 72 lives lost, 18 children, all avoidable. A fatal failure of market and state. A tragedy that must never happen again.

It is completely unacceptable that we have thousands of buildings still wrapped in unsafe cladding seven years after Grenfell.

And that’s why we will bring forward a new remediation action plan this Autumn to speed up the process and we’ll pursue those responsible – without fear or favour.

This must lead to new, safer social housing for the future.

Under the Tories, new social housing plummeted.

We will reverse that tide – with an ambition to be build more social homes than we lose, within the first financial year of this Labour Government.

In my first weeks in office, I set out how we will start this council housing revolution.

But Conference, with Government support must come more responsibility.

This is why today I want to give you my promise that this Labour Government will take action to ensure all homes are decent and safe, and residents are treated with the respect they deserve.

And Conference, of course, many Housing Associations, councils and landlords do good by their tenants and I know how hard they’ve had it after 14 years under the Tories.

Which is why I will work in partnership with the sector to deliver the change.

I will clamp down on damp and mouldy homes by bringing in Awaab’s Law in the social rented sector this autumn and we’ll extend it to the private rented sector too.

We will consult and implement a new Decent Homes Standard for social and privately rented homes, to end the scandal of homes being unfit to live in.

We will also ensure social housing staff have the right skills and experience. And I will ensure 2.5 million housing association tenants in this country can hold their landlord to account for their high quality services and homes. So that repairs and complaints are handled faster, but more importantly, so social housing tenants are treated fairly.

I am under no illusion about the mountain we have to climb.

We all saw that this summer: violent extremists preyed on our communities and local councils were left picking up the pieces.

Local leadership is the foundation of strong communities.

That’s why I have put local government back where it belongs, at the heart of my department’s name and mission.”

Original Post from propertyindustryeye.com

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Rogue letting agency ordered to pay £50,000 for a series of offences

Sagal Abdi Wali

An agency in North West London has been found guilty of a series of offences under the Housing Act 2004 at two Houses in Multiple Occupation (HMOs) in Camden.

At Highbury Corner Magistrates Court, London Living Group Limited of 1a Chalk Farm Parade, Adelaide Road, London, England, NW3 2BN and its company director, Alvaro Odeh-Torro, of London Road, Leigh-on-Sea, Essex, SS9 and  Chalk Farm Parade, Adelaide Road, London, NW3 were, between them, convicted of a total of eight offences under the Housing Act 2004, committed at two Camden properties, and collectively fined a total of £47,200 with costs of £3,000.

Both properties were licensed as HMOs and were inspected after the Council obtained information that Mr Odeh-Torro and his company were involved with the management of the property. Mr Odeh-Torro is well known to Camden Council after it had taken earlier enforcement action against other companies (Alterna Limited and LRTR Limited) for similar offences under the Act previously and issued financial penalties for breaches of the Act against companies of which was a director.

An inspection of 25 Carrol Close on 2 February 2023 found that the property was being occupied by more households than was authorised by the HMO licence (an offence under s.72(2) of the Act. Officers also noted several issues breaching the Management of Houses in Multiple Occupation (England) Regulations 2006 including defective fire doors.

The inspection of 68-70 Falkland Road on 9th March 2023 also found that an undersized room was being occupied despite the HMO licence specifically stating that the room should not be occupied.

Mr Odeh-Torro and London Living Limited also pleaded guilty to offences under s.238 of the Housing Act 2004 after they were found to have provided false or misleading information to the Council relating to the receipt of rental payments from the tenants.

Cllr Sagal Abdi-Wali, cabinet member for Better Homes at Camden Council, which successfully prosecuted the agency said: “Around a third of Camden residents rent from private landlords and they deserve to live in properly regulated, safe homes and to be treated fairly.
“Most of our landlords are decent law-abiding people. However, for too long, a minority have been able to let housing that is unsuitable while exploiting their tenants and woefully disregarding their wellbeing and safety
“Our private sector housing service are continuing to improve the standards in Camden’s private housing sector, empowering renters to take action and helping good landlords to run successful businesses

“Our message to landlords and letting agents is that we are here to work with you; to provide advice and assistance first of all and to ensure you can meet your obligations.”

Orignal Post from propertyindustryeye.com

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Estate agency touting yields limited success as over 90% of homes sold with first agent

Uk homes statistics

Some estate agents believe that more than 50% of homes sell with a second agent, but this is simply not the case, according to property data and analytics company TwentyCi.

This stat regarding more than half of homes being sold with a second agent has been floating around the market for a number of years, points out Christopher Watkin, a regular contributor to EYE.

This statistic has often been quoted by industry leaders and PropTech suppliers, and typically goes unchallenged, but fresh findings suggest something very different.

“Historically for the last decade, it was believed that only 40 to 50% of properties sold with the first estate agent,” Watkin said. “This [new data] dispels the myth that a second agent is more successful.”

The data reveals that more than 18 out 20 UK homes sell with the first estate agency listed to market the property.

Of 1,776,709 UK homes sold sold subject to contract with an estate agency since 1st January 2023, under a sole agency agreement, 1,655,754 of those UK homes (93.2%) sold stc with the initil estate agent marketing the property.
Only 120,955 UK sold stc with the second UK estate agent marketing the home (6.8%).
Watkin cautions that the success achieved by those initially instructed to market a property “is not a charter for estate agents to overvalue to secure the listing”.

He continued: “It must noted that while 1.77m properties have sold STC since the 1st January 2023, over 2.9m UK homes have been listed since January 2023, meaning only around 60% of properties listed have had a sale agreed on them. Once you take into account sale fall throughs, that drops to only 53% of listings exchanging and completing (when the agent is paid).”

“The key challenge for estate agents is not just securing the listing first time but ensuring the property is priced correctly from the outset to guarantee a successful sale. This data should serve as a wake-up call for UK agents and homeowners alike – overvaluing might massage your ego in the short term with your listing’s market share, in the long-term, you are setting yourself up and the homeowners you serve to failure, wasted time, lost homes they want to buy, and ultimately, financial loss for everyone.”

Homes Sold
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Agent reveals massive corruption and forgery by tenants on industrial scale

fraud

An agent claims he and his peers in other agencies face massive struggles with forged IDs, digitally-altered supporting documents and undeclared financial issues.

In the last month Benham and Reeves, a London firm, detected eight forged passports or IDs; 40 digitally-altered bank statements, utility bills, payslips or proof of address; 50 forged employment references; and 30 undeclared county court judgements (CCJs) and  individual voluntary arrangements (IVAs).

Agency director Marc von Grundherr says: “The lettings market has become a key target for fraudsters due to the illicit profits they can generate quickly and over a short period of time and nowhere more so than in London, where demand is high and rental values are at their highest.

“Landlords themselves must be on guard but even more so, it’s down to letting agents to provide that vital line of defence which simply can’t be upheld through technology alone.

“The reality is that some agents simply don’t do an adequate job. Unfortunately, every agent does things differently and so landlords really need to be sure their agent is going the extra mile.

“For us that means strict digital ID verification but it also includes a manual check of all documentation, rigorous checks of employment references including domain names, registration details and IP addresses cross referenced with payslips and bank statements, an online search of the applicant including a review of their social media profiles, open-source tools and search engines, information sharing with the police and more.

“So whilst it’s inevitable that some crooks will slip through the net, this threat can be drastically reduced by taking a proactive approach to tenant verification and not leaving it technology alone.”

He says that while digital and AI technology has evolved rapidly and can process vast amounts of data in a timely fashion, rogue tenants have also evolved with it, becoming increasingly more inventive in how they trick the system.

von Grundherr also cites four real world examples of how a more thorough human-and-tech approach has helped prevent huge financial loss:

• High net worth fraud: A supposed art dealer with an undisclosed CCJ of £12,151 provided altered bank statements and was found to be in arrears at an undisclosed tenancy while claiming Universal Credit. Without careful cross-referencing, this fraudster could have easily slipped through the cracks.

• Organised crime network: Several applications from different tenants shared suspicious similarities, such as identical email formats and switched referees. All references were found to be fraudulent, leading to police involvement. This case highlighted the importance of scrutinising not just individual applications but patterns across multiple ones.

• Cloned company scam: Multiple applications were made by employees of a fake media company. Altered bank statements, fake payslips, and undisclosed addresses linked these applicants to a newly formed lettings business likely involved in illegal activities. The discovery of these links prevented a potentially large-scale fraud.

• Fraudulent barrister: A barrister applied with what appeared to be legitimate documents. However, closer inspection revealed altered bank statements and a gambling addiction. The applicant had also provided fake landlord details to hide arrears at their current tenancy. This case underscores the importance of not taking professional status at face value and digging deeper.

Original Post from lettingagenttoday.co.uk